Financial Crisis Suppose that banks are less able to raise funds and so lend less. Consequently, because people and households are less able to borrow, they spend less at any given price level than they would otherwise. The crisis is persistent so lending should remain depressed for some time. Refer to Financial Crisis. What happens to the price level and real GDP in the short run?
a. both the price level and real GDP rise
b. the price level rises and real GDP falls
c. the price level falls and real GDP rises
d. both the price level and real GDP fall
Ans: d. both the price level and real GDP fall
You might also like to view...
In the above figure, suppose the economy is initially at point A. People come to expect the future U.S. exchange rate to be higher. As a result there is a change from point A to a point such as ________
A) point B B) point C C) point D D) point E
Free trade ________ living standards by ________ economic efficiency
A) lowers; eliminating B) raises; equalizing C) lowers; decreasing D) raises; increasing
An example of a cost of economic growth is
A) longer life spans. B) political instability. C) alienation. D) increases in illiteracy.
What flows to households in a factor market?
a. payments for finished products b. goods and services c. payments of rent and wages d. technology and machinery